A tax audit reconsideration provides taxpayers with an opportunity to challenge the IRS’s audit conclusions by submitting new information or evidence after the audit has been finalized. It is distinct from a new audit; instead, the IRS reviews the previously completed audit case using the additional documentation or explanations you provide, potentially leading to an adjustment of your tax liability.
Why Was Tax Audit Reconsideration Created?
Tax audits can be complex and sometimes result in disagreements due to overlooked evidence, misunderstandings, or errors. The IRS established the audit reconsideration process to allow taxpayers to present new facts after an audit closure without undergoing the time-consuming and resource-intensive process of a full audit re-examination. This process helps maintain fairness, giving individuals and businesses a mechanism to correct mistakes or provide clarifications smoothly.
How Does Tax Audit Reconsideration Work?
The process generally follows these steps:
- Determine if Reconsideration is Needed: You believe the IRS audit findings are incorrect or new supporting documents have come to light.
- Collect Documentation: Gather relevant new evidence such as receipts, corrected tax forms, bank statements, or any records that were unavailable during the initial audit.
- Submit Your Request: Contact the IRS office that conducted the audit or follow the instructions in your audit report to formally request reconsideration. Usually, a letter detailing why you dispute the audit results, along with supporting documents, is required.
- IRS Review: The IRS reviews the submitted materials and may request additional information or clarifications. Occasionally, they might conduct a limited follow-up, but not a full audit.
- Final Decision: Based on the new evidence and any further interactions, the IRS either revises their audit findings or upholds the original decision.
Who Can Request Tax Audit Reconsideration?
Any taxpayer—whether an individual, self-employed, or running a business—who has undergone an IRS audit can request reconsideration if:
- They have new evidence not previously reviewed.
- The audit included errors or overlooked details.
- There is a misunderstanding regarding tax positions or documentation.
Note: Reconsideration applies only after an official audit is completed; it is not available for pre-audit tax return reviews.
Practical Examples
- Anna’s Case: After her audit disallowed some business expenses due to missing receipts, Anna discovered digital copies of invoices stored online. After submitting these during reconsideration, the IRS accepted them, reducing her tax liability.
- Mark’s Correction: An accuracy error made by Mark’s accountant incorrectly increased his tax bill. Through reconsideration, Mark submitted corrected forms and computations, leading the IRS to adjust his taxes without a new audit.
Tips for a Successful Tax Audit Reconsideration
- Act promptly: IRS responsiveness can depend on timing.
- Be thorough and organized: Make sure submitted documents clearly support your claims.
- Provide a clear explanation: A concise letter outlining why you disagree with the audit helps.
- Follow IRS instructions exactly: Use provided contacts and forms to avoid delays.
- Consider professional assistance: CPAs or tax attorneys can enhance your case presentation.
Common Misunderstandings About Reconsideration
- “Audit decisions are final.” Actually, reconsideration exists exactly to revisit decisions with new proof.
- “I must go through another full audit.” Reconsideration is a review of new information, not a full re-audit.
- “I need a lawyer to communicate with the IRS.” While professional help can be beneficial, you can engage directly with the IRS yourself.
Frequently Asked Questions
How long does the reconsideration process take? Typically, it ranges from a few weeks to several months depending on case complexity and IRS workload.
Can I appeal instead of requesting reconsideration? Yes. The appeals process is a more formal legal step, usually after reconsideration, handled by the IRS Appeals Office or tax court.
What if my reconsideration request is denied? You may still pursue appeals or alternative dispute resolutions; however, providing new evidence is generally not accepted after denial.
Summary Table: Key Points About Tax Audit Reconsideration
| Aspect | Details |
|---|---|
| When to Request | After IRS completes an audit and you have new evidence or disputes findings |
| Purpose | IRS review of existing audit case using newly submitted facts |
| Eligible Taxpayers | Individuals, businesses, and self-employed taxpayers previously audited |
| Required Documents | Receipts, corrected returns, bank statements, detailed explanations |
| Expected Timeline | Several weeks to a few months |
| Possible Outcomes | Reduction, confirmation, or adjustment of tax liabilities based on new evidence |
References
- IRS, “Audit Reconsideration,” https://www.irs.gov/businesses/small-businesses-self-employed/audit-reconsideration
- IRS, “Appeals Process,” https://www.irs.gov/appeals
- Investopedia, “Tax Audit Reconsideration,” https://www.investopedia.com/terms/t/taxauditreconsideration.asp
For more information about handling audits and IRS disputes, visit FinHelp’s IRS Audit Guide and the official IRS website.
Tax audit reconsideration empowers taxpayers to correct IRS audit findings with new evidence, offering a fair chance to amend tax liabilities without undergoing a full re-audit.